Apple on a Tear on all Fronts

Apple products are on a tear. Does this warrant an investment?

Apple(NASDAQ:AAPL) has had some good months for both the stock price and the news. Ever since the media events for the new iPhone 5s and the new iPads, there have been a lot of positive notes.

In order to determine if this optimism is justified and how the company is handling its ongoing struggle with Google's(NASDAQ:GOOGL) Android operating system, it is important to analyze Apple's current positioning in this battle.

Current situationSales of new products have been off the charts, with new iPhones selling 9 million units in the opening weekend, close to double last year's intro of the iPhone 5. Of course, some people were critical of the 5c (a plastic-cased reincarnation of last year's iPhone 5 with a $100 price reduction), but this skepticism only served to boost numbers for the new, higher priced/higher margin 5s.

The iPhone 5s has received excellent reviews. The TouchID fingerprint sensor seems to work extremely well in almost all cases, and the new A7 chip is exceptionally fast. Ewan Spence of Forbes called the 5s "the best all-round smartphone on the market right now."

Stock reboundApple has seen a tremendous rebound on the positive sales results. Additionally, the fiscal Q4 report showed that margins stabilized over the period and have not continued to fall, as many had predicted.

Last September, Apple reached a high of just over $700 before plummeting to recent lows of $385. In late June of this year, it made a second drop below $400 before beginning its current rise. It was mid-September, however, when it really regained momentum, charging upward from $450 to Friday's (Nov. 29th) close of $556.

[Apple 6 months – Source: Yahoo Finance]

NegativesOn the negative side, Android continues to increase its market share (now at 81% worldwide, according to Strategy Analytics), and IDC projects that the ASP of smartphones worldwide will drop from $337 to $265 (-21%) by 2017.

Positive dataPositive data, aside from the 9 million iPhones sold during the launch, comes on several fronts. The same IDC report on shrinking smartphone ASPs also forecast that unit sales would rise more than 65% by 2017. This still leaves room for growth.

Other surprises include news from Bloomberg that Apple won 76% of smartphone sales in Japan in October, according to data from Kantar Worldpanel ComTech report. The astounding figure likely resulted from Apple's recent introduction to provider NTT DoCoMo, the nation's largest carrier. Meanwhile, Wall Street Journal Digits reports that iPhone manufacturer Foxconn has boosted 5s production to a staggering 500,000 per day, while 5c production has been reduced.

The 4s model is also still on sale, so adding a conservative 50,000 for the 4s equals production of 800,000 daily. A 90-day sales period at this rate would give 72 million sales, or 50% increase over last year's December quarter sales. While this figure is likely high, it conforms with the fact that opening weekend sales were 80% over last year's. It would be surprising if Apple's aggressive rollout did not result in significantly higher year-over-year sales.

China Mobile(NYSE:CHL), China's largest carrier, is planning a Dec. 18 announcement to introduce a new brand for mobile services, and it is expected to include the availability of the iPhone on its network. The company is estimated to have 70 million potential iPhone customers. Of course, many will go to competitors like Samsung and other companies with phones running Google's Android operating system, but a good share would go to Apple, boosting sales.

MapsOne interesting positive note comes from a recent report on U.S. smartphone share by comScore for September 2013. The main thrust of the report is market share (in which Apple's iOS gained 0.7 percentage points, while Android lost 0.2), which illustrates audience reach of the top 15 apps.

Source: comScore

Interestingly, Apple's Maps app is gaining on Google Maps. Remember, Google Maps is available on both Android and iOS, whereas the Apple product is available only on the latter.

Apple has gone a long way to fixing data errors that were rife in its original release. Still, the uproar masked the fact that, outside disappointing location accuracy issues, Apple Maps is, and was at the time, a very good product. It's flyover view is spectacular, it had voice directions (not in the Google Map for iOS at the time), it used vector mapping that is much quicker and provides better, clearer images, and it cached certain data to allow navigation without an Internet connection.

In any case, it's clear that now iPhone users are using Apple Maps instead of Google's product. Since so much search originates from maps (local restaurants, etc., etc.), this is a significant loss for Google. It's important for Apple's share price because it shows that the company has overcome the embarrassing introduction of Maps and continues to offer iOS users the ultimate overall user experience.

MarginsAnother reason to justify the current run up is that Apple's last quarter margins appear to have stabilized. With a high of 47.37% in Q1 2012, the subsequent drop has had investors scared that price wars would drive down margins. But, Apple hasn't been chasing low-priced phones. Instead, its maintained the image of a premium product company. Last quarter, the margin leveled, even gaining slightly from the previous quarter.

ConclusionApple stock spent a year in the dumps, solidly off from lifetime highs, as both margins and revenue growth dwindled from previous years. But recently, margins have leveled. Combined with new sales numbers and a strong new product lineup, it's a new story of continued growth and success. This warrants an optimistic view of the stock's future.